Registered Retirement Savings Plan (RRSP)

An RRSP is a special savings account that is geared toward retirement. All amounts contributed toward an RRSP are deductible from your taxable income. Also, returns on the capital remain tax-sheltered.

From which sources should amounts come for an RRSP contribution?
Money contributed to an RRSP must come from earned income. Earned income includes employment income, grants, royalties, net rental income and net business income. Other sources of earned income include alimony, disability pensions from both the Canada and Quebec Pension Plans, as well as supplementary unemployment benefits.

Is there a limit to the amount I can contribute?
Each year, you may contribute up to 18% of your earned income of the previous year, subject to a maximum determined by the Canada Revenue Agency (CRA). The tax assessment notice you receive from the CRA (formerly Revenue Canada) clearly states your contribution limit for the current year. You are also entitled to an additional $2,000 contribution over the limit. Although this amount is not deductible from your taxable income, the returns on this amount are tax-sheltered.

When can I contribute towards an RRSP?
You may contribute at any time. You can request an income tax reduction for the amounts contributed towards an RRSP during the taxable year or in the first 60 days of the following year.

Can I withdraw money invested in an RRSP before I retire?
You are entitled to withdraw part or all of your RRSP, as need be, as long as your investments are redeemable. Otherwise, you will have to wait until they reach maturity. All amounts withdrawn are added on to your annual income and are therefore taxable.

At what age can I retire and use my RRSP?
You can retire at any time, but at the latest on December 31 of the year in which you turn 71.

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